Attitudes towards climate policies in a macrodynamic model of the economy

Abstract

In a recent article published in this journal, Guarini and Porcile (2016) expanded the Balance-of-Payments Constraint (BoPC) growth model suggesting a way to make it possible to address some of the challenges posed by greenhouse gas emissions. Building on their set up, we formalise into the model a mechanism that explains how people with different environmental attitudes or sentiments influence each other and contribute to the design of environmental policies. We detail the concept of transition probabilities for the agent's switching from pro- to anti-environmental positions and vice-versa and discuss the macroeconomic results that follow. Numerical simulations allow us to investigate in more detail the implications of the validity of Porter's hypothesis as well as to discuss the feasibility of decoupling conditions. A policy implication of our analysis is that we should encourage the dissemination of pro-environmental attitudes among the public because this could lead to a more desirable equilibrium. As important as enhancing public knowledge of climate change is to keep alive the debate at the collective level so as to influence the probability of switching sides.